Toyota executive says 2008 sales target will be difficult to achieve

Kyong-AeChoi

(Recasts to add detail, stories on currency impact, U.S. market and launch of new cars in Korea.)

By Kyong-Ae Choi

SEOUL (MarketWatch) -- Toyota Motor Corp. (7203.TO) Thursday said its 2008 global sales target of 9.85 million vehicles looks hard to achieve given the strong yen, the high price of raw materials and lower expectations for total U.S. auto demand.

"However, we will try to achieve this year's sales target by boosting our sales in emerging countries such as China, Russia and oil-producing countries (in the Middle East)," Toyota Motor Executive Vice President Uranishi Tokuichi said at a press briefing in Seoul to launch new car models next year.

In December, Toyota said that despite poor domestic demand in Japan and a cloudy U.S. outlook, it aimed to boost global sales by 5% in 2008 to 9.85 million cars, pulling ahead of rival General Motors Corp. and making it the biggest car seller in the world on the back of strong demand in the BRIC nations.

But the outlook has deteriorated since then, particularly in the U.S. where a combination of subprime induced woes, a credit crunch, roiling stock markets and economic uncertainty have led industry analysts to downgrade total 2008 auto sales forecasts from the 16 million - seen as the minimum for a healthy year - hoped for late last year.

Toyota Chairman Fujio Cho - also speaking in Seoul - forecast U.S. automobile sales this year to reach 15.5 million units, in line with most carmakers' forecast of 15.5 million to 15.7 million cars and light trucks.

However, some are less optimistic, with industry analysis group J.D. Power & Associates earlier this week tipping industrywide U.S. sales of light-duty cars and trucks this year at 14.95 million, the lowest level since 1994.

Closely Watching Yen

High raw materials costs are expected to cut into carmakers' margins this year, reducing the scope for discounts that could boost sales, particularly in the U.S.

Toyota must also content with the rising value of the yen against the dollar. The Japanese currency traded Thursday at around Y99 to $1 - bad news for export-oriented companies like carmakers, as a stronger yen versus the greenback deflates profits earned in the U.S. when converted into the Japanese currency. It also potentially damps sales by making Japanese exports to the U.S. more expensive.

Analysts say that each one yen drop in the dollar reduces annual operating profit at the three main Japanese car makers by 1.5% to 2.5%.

Some analysts have cautioned that an exchange rate of at least Y110 is the break-even point for the top Japanese carmakers in the next fiscal year.

Asked if Toyota plans countermeasures to offset the strong yen, Cho said only that the company will keep an eye on yen-dollar movements.

"It remains to be seen how the yen-dollar will move," he said.

Earlier this month, Toyota President Katsuaki Watanabe warned that the recent drop in the dollar versus the yen would pressure the company's earnings. He said the automaker was considering new steps besides cost cutting to bolster profit in light of the rising yen, although he did not elaborate.

Analysts have already warned the company is likely to post its first drop in operating profit in nine years for the fiscal year through March 2009, mainly due to the unfavorable exchange rate.

Potential Seen In South Korea; New Cars To Launch

The Toyota executives were in Seoul to announce that it will sell three more models - the four-door Camry sedan, the compact RAV 4 sport utility vehicle and the hybrid five-door car Prius - in South Korea from 2009.

Toyota will aim for total sales of 500 units a month of the three models at first and then move up to 1,000 units a month, the automaker said without providing a timeframe.

"We decided in mid-March to bring in the three models to meet Korean customers' needs in the non-luxury imported car market," said Toyota Motor Korea President and Chief Executive Taizo Chigira.

He added that talks to decide the models' selling price are ongoing with the parent company in Japan.

Cho was upbeat about the potential of the Korean market, saying, "the Korean imported car market still has room to grow compared to the Japanese foreign car market."

Imported vehicles accounted for just 5% of the total cars sold in South Korea in 2007, Cho said.

Toyota currently offers only luxury Lexus sedans and sport utility vehicles in South Korea.

It sold 32,886 Lexus cars in the country between 2001-2007. Last year, it sold 7,520 Lexus models to account for 14% of the South Korean imported car market.

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